Case law on redundancy

Mhindurwa v Lovingangels Care Ltd | ET |25 June 2021
3311636/2020
Issue: unfair dismissal - furlough as an alternative to redundancy

The Employment Tribunal held that a care assistant had been unfairly dismissed when her employer failed to consider furlough as an alternative to redundancy.

The carer provided live-in care for an elderly lady who then went into a care home. The care agency said there was no longer an immediate requirement for her role, or any other live-in care work, as demand had reduced significantly due to COVID-19. She was dismissed for redundancy.

The employee had just over two years’ service and brought a claim for unfair dismissal on the basis that she should not have been dismissed but should have been furloughed instead.

The tribunal held that the dismissal was unfair. In July 2020, a reasonable employer should have considered furlough to avoid redundancy dismissals as part of the duty to consider reasonable alternatives. The employer had also failed to carry out a fair appeal process.

Although no work was available at the time of the dismissal, the employer did not know when the position was going to change, and had not even considered furlough for a period of time to see if future work retuned to previous levels. This situation was exactly what the furlough scheme was intended for.

Handley v Tatenhill Aviation Ltd | ET | 20 January 2021
Issue: redundancy and furlough
2603087/2020

A flying instructor for a flying school with 12 staff was told that the business was closing due to the pandemic. Just after the start of the first national lockdown, he was given a furlough agreement to last for three weeks or ‘until you can return to work as normal’. In April 2020, the flying school made redundancies and the instructor was selected for redundancy and dismissed in August 2020. He claimed unfair dismissal on the basis that the furlough agreement prevented his redundancy.

The unfair dismissal claim did succeed on procedural grounds because the decision to select the claimant for redundancy was made prior to the start of the consultation process. The scoring of the instructor against the selection criteria took place before there had been any discussion about the potential redundancy or the selection criteria to be used. However, it was the procedural reasons and not dismissing him for redundancy, despite the existence of the furlough scheme, that made the dismissal unfair.

The tribunal agreed the employer needed to cut costs despite the furlough scheme support.

Another employer may have chosen to leave the employee on furlough for longer, but it was not unfair for this employer to choose not to. Employers can decide whether to make redundancies. This employer needed to cut costs irrespective of the furlough scheme and wanted to use furlough to pay some of the costs of the redundancy, which was allowed at that time.

There was a 100% chance that the instructor would have been dismissed if a fair procedure had been followed so even though he was technically unfairly dismissed due to procedure, he received no compensatory award.

This is a tribunal-level decision that says making someone redundant instead putting them on furlough is not necessarily unfair. There are other cases with apparently inconsistent decisions, such as Mhindurwa v Lovingangels Care (2021), which decided that dismissing an employee instead of putting them on furlough because of the pandemic, did make the dismissal unfair. However, the facts of this and other Covid-19 cases are subtly different. In this case the employee was already on furlough prior to redundancy; in some other cases the employer failed to consider furlough altogether.

The key aspect for employers is to consider furlough. If having made a balanced assessment employers decide they still need to cut costs, then the dismissal may be fair, provided that all other steps are followed.

When looking at the fairness of a dismissal on grounds of redundancy, employers must at least have considered furloughing the employee, and have a good explanation to support their decision not to use the scheme at the time. Employers should be prepared to defend redundancy decisions and ensure they have evidence to support them.

​(unreported, [2015] UKSC 26 29 April 2015, SC)
Issue: Collective consultation

The union alleged that the university had failed to carry out collective redundancy consultation in compliance with its obligations under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA). The university regularly used fixed-term employees to carry out research work, or as maternity cover, or to teach specific modules.

Four employees brought a test case. They had been employed on fixed-term contracts and their contracts had not been renewed. If they were dismissed as redundant then they should be counted when determining whether the twenty employee threshold for collective consultation had been reached.

The central issue was whether dismissal because of the expiry of a fixed-term contract was 'for a reason or reasons not related to the individual concerned'. The legal tests involved are complicated. However, in essence the collective redundancy obligations under TULRA are triggered where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. To assess whether there are 20 employees it must be decided if non-renewal of fixed term contracts count towards this total. The definition of what amounts to a redundancy in TULRA is derived from the European Collective Redundancies Directive which in turn states that redundancy dismissals are those which are 'for a reason not related to the individual concerned....' This means that there should only be a collective redundancy dismissal where the termination arises for a reason that is not related to that individual employee, for example restructuring.

The Court of Session confirmed that failure to renew these fixed-term contracts did not require collective consultation and that the employees were not redundant for the purposes of the legislation and did not 'count' for the purposes of the thresholds in Section 188.

The Supreme Court disagreed and ruled that the individual employees must be included for headcount and collective consultation purposes. All four employees concerned had agreed to a fixed-term contract, accepting that it would come to an end at a particular date or on the occurrence of a particular event. Those were reasons not ‘relating to the individual concerned’.

Implications for employers

• Before the Court of Session appeal was heard, the UK government introduced on 6 April 2013 new legislation on collective redundancy consultation (Trade Union and Labour Relations (Consolidation) Act 1992 (Amendment) Order 2013). This expressly states that fixed-term contracts which end at their agreed end point do not count as redundancies for the purposes of collective redundancy consultation.
• Dismissals of employees on fixed-term contracts 'at the agreed termination point' can therefore be excluded from the collective redundancy consultation obligations.
• If the dismissal of an employee on a fixed-term contract does not occur at the agreed termination point then despite the employee being on a fixed-term contract they would need to be included in collective consultation, as their dismissal would not relate to them as an individual.
• Under Section 188 TULRCA, an employer is required to carry out collective consultation when proposing to 'dismiss as redundant' 20 or more employees at an establishment within a 90 day period.
• The European Directive from which UK collective redundancy law is derived, excludes all fixed-term contracts from collective consultation.
• Employers should always consider if the expiry of any fixed-term contract (and any failure to award a new contract to the individual) could be part of a wider redundancy exercise within its business.
• If the number of potential redundancies amongst other employees (whose fixed-term contracts are not expiring) reaches 20 this still triggers the collective consultation obligation, then the employer will have to consult with all those individuals, including the fixed-term employees.
• The expiry and non-renewal of a fixed-term contract will also be redundancy for the purposes of unfair dismissal and statutory redundancy pay.
• Employers must consider the specific reasons for non-renewal of fixed-term contracts expiring during a period in which redundancies are being made and decide if the threshold for collective consultation has been reached.
• If the employer misunderstands the position and incorrectly fails to carry out collective consultation then there may be a protective award of up to 90 days' pay per affected employee.
• Each case will depend on its own facts and employers should proceed carefully remembering that there are still risks inherent in using fixed-term contracts.
• Normal individual consultation also has to take place with fixed term employees, exploring other possible vacancies etc.
• The new legislation is not retrospective and therefore did not apply to the non-renewals before April 2013.

​(unreported, C-80/14, 30 April, ECJ)
Issue: Collective redundancy consultation

Mass redundancies were made following the insolvency of the Woolworths and Ethel Austin companies. The union sought protective awards because the administrators had failed to properly consult employees about the redundancies. The relevant provision in the Trade Union and Labour Relations Consolidation Act 1992 (TULCRA) states that employers are only obliged to consult employee representatives where 20 or more redundancies are proposed ‘at one establishment’ within a period of 90 days or less. An employment tribunal ruled that each Woolworths store was a separate establishment and therefore only employees at stores where 20 or more employees were dismissed received protective awards. Employees in stores where there were less than 20 employees therefore did not receive any compensation.

On appeal, the Employment Appeal Tribunal (EAT) held that all the employees should have received compensation. If followed, the decision would mean that the words ‘at one establishment’ should not be part of the redundancy consultation definition. The obligation to consult collectively arises where, within a 90 day period, 20 or more employees are to be made redundant, anywhere over the whole of the employer's business, regardless of where they work. The provision under TULCRA referring to 20 or more redundancies ‘at one establishment’ was held incompatible with the Collective Redundancies Directive. (Under this Directive member states had a choice of two complex definitions of collective redundancy but the definition the UK chose to follow refers to ‘establishments’, not one single establishment).

The EAT decision was appealed to the Court of Appeal (CA) who referred the matter to the European Court of Justice (ECJ).

The ECJ decision would therefore have a relevance to whether or not the words 'at one establishment' should be deleted from Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992. However, the ECJ decided that the Directive does allow Member States to only require collective consultation when employers propose 20 or more redundancies in 90 days ‘at one establishment’. The EAT was therefore incorrect and the number of dismissals in all an employer’s establishments do not have to be added together to decide if the threshold for collective redundancy consultation is met.

The Court of Appeal in the UK now has to decide definitively if each branch of Woolworths was an establishment or not.

Implications for employers

• Subject to the appeal to the CA, the application of the collective redundancy rules has now fundamentally changed for many employers.
• It remains slightly confusing for employers to know if they should consult at places where less than 20 redundancies are being implemented in one establishment but there are other redundancies at other establishments. However if employers do not wish to consult collectively, there is a strong argument to say they do not have to where separate establishments are involved.
• The case is an example of an EU intervention relieving the burden on employers, as employers can probably go back to the position of their consultation obligations being triggered on an establishment by establishment basis. However the decision of the CA is still awaited.
• It appears that employers do not have to make consultation decisions based on the numbers of all redundancies proposed across the whole business.
  There is less of a risk of finding that redundancies at one site must undertake collective consultation because another set of proposed redundancies are needed elsewhere in the business and which takes total number over the twenty or more threshold.
• A 'single establishment' appears to mean the local employment unit to which the redundant workers were assigned to carry out their duties (which it is for each EU Member State to determine).
• Employers with multiple sites should still be extremely careful with collective redundancies.
• Employers with small numbers of employees or only one premises will not be affected in any event.
• For other employers, the obligation to consult collectively only appears to arise if 20 or more employees (within a 90 day period) are made redundant if they work in a single employment unit.
• The words ‘at one establishment’ in the collective redundancy consultation definition can still be relied on by employers and tribunals determining collective redundancy consultation obligations.
• Employers do not need to effectively aggregate redundancies across all sites.
• Employers making twenty or more employees redundant at one establishment are still faced with an increased risk of protective award claims of up to 90 days gross pay for each employee if they fail to consult with the employee representatives (or union representatives) appropriately.
• If 20 to 99 employees are to be made redundant over a period of 90 days or less, consultation must begin at the very least 30 days before the first dismissal takes effect.
• If 100 or more employees are to be made redundant over a period of 90 days or less, consultation must begin at the very least 45 days before the first dismissal takes effect (reduced from the previous 90 day consultation from 6 April 2013).
• Collective consultation must be meaningful and include ways and means of avoiding the dismissals, reducing the number of dismissals and mitigating their consequences.
• If the CA follows the ECJ then the redundancy consultation burden is relieved by reducing number of instances when employers must consult employees collectively.
• As well as the duty to consult collectively, employers must notify the Department of Business, Innovation and Skills of the redundancies with the appropriate form.
• Employers must monitor redundancy proposals across all branches of the entire business and know when the number approaches 20 in a 90 day period.
• If a parent company has separate subsidiary companies which are different legal entities then both companies together may be able to dismiss an aggregate of over 20 or more employees without the duty to consult being triggered.
• Employers may wish to review their employee representative bodies to ensure that they are properly elected and able to deal with a redundancy consultation.
• Employers without elected employee representatives may consider having employee representation in place.

Following this case the ECJ then made very similar judgments in two cases Lyttle and others v Bluebird UK Bidco 2 Ltd (unreported, C-182/13 13 May 2015, ECJ and Cañas v Nexea Gestión Documental SA and another (unreported, C-392/13 13 May 2015, ECJ which both also considered collective consultation obligations in the context of redundancy.

The implications for domestic legislation of all these cases are that collective consultation obligations are only triggered by 20 or more dismissals at one establishment within 90 days. Establishment means the local unit or entity to which the redundant workers are assigned to carry out their work. A total of 20 dismissals at different establishments does not trigger the need for collective consultation in most cases.

​(unreported, UKEAT/0315/13 20 February 2014, EAT)
Issue: Redundancy payments

The employer made a number of redundancies from the 1970’s to 2012. It had a redundancy policy which did not say if redundancy payments would be restricted to the statutory scheme.

Under the Employment Rights Act 1996 statutory redundancy payments are calculated using an employee's age, length of service and weekly pay. However these amounts are capped at a maximum maximum of twenty years service and a cap on weekly pay, currently capped at £464.

For decades the employer had consistently removed these statutory caps when applying the redundancy calculations. In particular, it did not cap the amount of a week's pay nor the number of year's service to be applied. This meant that an employee with, for example 25 years' continuous service was credited with five years' more service than the statutory scheme would offer.

In 2012 a number of further redundancies were made, but the redundancy payments were capped and not calculated according to the enhanced uncapped formula which the employer had applied in the past. Many employees received only the statutory minimum amount and subsequently brought claims for breach of contract alleging that there was an implied term in their contracts of employment which meant the employer must pay them enhanced redundancy pay using the uncapped formula.

The Employment Appeal Tribunal and the employment tribunal decided to imply a term into redundant employees' contracts entitling them to enhanced redundancy payments. In the absence of any evidence to contradict the employees' claims it appeared that the same 'uncapped' enhanced formula was paid in the past at least between 2002 and 2006. The position after 2006 was unclear because the employer then varied its approach to redundancy payments. The tribunal decided that there was a contractual term implied into the employees' contracts and, that although there may have been a variation in practice from 2006 this did not change that implied term. The employees were entitled to the enhanced redundancy payments.

Implications for employers

• Employers should have clear redundancy policies which are regularly reviewed, checked and updated.
• Employers who wish to maintain discretionary redundancy schemes should make this clear in any policy and redundancy payments should be made on a variety of terms on a case-by-case basis.
• Implied terms can arise from custom and practice and if employers adopt regular patterns of payments this may give rise to a contractual term.
• Generally, inconsistent practices in relation to redundancy payments would not lead to a contractual term being implied. However where the practice has been broadly consistent over a long period of time it appears that an implied term may arise.
• Employers should ensure that discretionary payments do not become contractual and manage that situation to avoid terms becoming implied.
• Employers may wish to consider making any discretionary redundancy payments as part of a valid settlement (or compromise) agreement.

(unreported, [2015] UKSC 63 SC 21 October 2015)
Issue: Redundancy - collective consultation

This long running case concerns the closure of a US military base in Hampshire and raised several issues, including when the collective consultation process should begin. The USA decided to close the base and in April 2006 the employees were informed of the closure and in June 2006 their representatives were told that all employees were at risk of redundancy by the end of September 2006. Collective consultation on the redundancies began on 5 June 2006 followed rapidly by notices of dismissal on 30 June 2006. The claimant brought a claim on behalf of those employees alleging that the employer had failed to comply with its collective consultation obligations as it did not consult on the decision to close the base prior to 5 June 2006. The USA said that no employer needs to consult with employees about a proposed operational decision that will lead to redundancies and that the obligation only arises after the decision to dismiss the employees as redundant has been made.

The case was referred to the European Court of Justice (ECJ) for clarification on when the obligation to consult arises. It asked whether the duty to consult on collective redundancies is triggered:

• when the employer is proposing, but has not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies (UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area) and another [2008] IRLR 4 EAT), or
• only when that decision has actually been made and the employer is then proposing consequential redundancies (Akavan Erityisalojen Keskusliitto AEK Ry and others v Fujitsu Siemens Computers Oy [2009] IRLR 944 ECJ).

The Advocate General (AG) decided that the obligation on an employer to consult on collective redundancies is triggered when it makes a strategic or commercial decision that compels it to contemplate or plan for collective redundancies.The opinion also hinted that it is not just the timing of consultation which is so important, but whether there has been effective consultation.

The ECJ normally follows the AG's opinion, but here it decided it did not have jurisdiction to decide when the obligation to consult on collective redundancies is triggered. This was because the Collective Redundancies Directive is aimed at improving the protection of workers and the functioning of the internal market. As this case involved the armed forces and activities like national defence are, in principle, excluded from classification as economic activity. Therefore the dismissal of staff of a military base does not fall within the scope of the Collective Redundancies Directive.

The case then returned again to the Court of Appeal (CA) to consider a number of issues, including how Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 which mentions consultation when the employer is proposing redundancies, applies. The CA's latest judgement confirmed one issue. The USA had said that the collective redundancy consultation provisions do not apply to any worker employed by a 'public administrative body' in the UK. The CA rejected this argument and said that public sector workers in the UK do have statutory redundancy protection and only those in 'crown employment' are excluded and covered by voluntary arrangements.

There was a further appeal and the Supreme Court finally held that the US Government did have collective redundancy consultation obligations towards the workers, and returned the case to the CA to decide if redundancy consultation began in time.

The remaining question of when the obligation to consult over collective redundancy arises is to be addressed later. The next decision should finally address if the duty to consult arises when the employer has made a strategic decision which will lead to collective redundancies, or at an earlier stage, when the employer is contemplating a decision from which redundancies may flow.

Implications for employers

• Public sector workers in the UK do have statutory redundancy protection.
• Employers are still in some uncertainty as the ECJ has refused to assist on the other key issue about when redundancy consultation is triggered.
• The ECJ's refusal to help means that UK employers did not get clarification on precisely when the duty to consult collectively on redundancies is triggered.
• The safest approach until further guidance emerges is for employers to start talking to employee representatives as early as possible when redundancies become a possibility, even if there is only a provisional decision that might lead to redundancies.
• The definitive 'legally correct' answer on when employers are obliged to start consulting on collective redundancies remains unanswered as the Advocate General's opinion doesn't go as far as was hoped and the ECJ refused to help any further.
• Employers should therefore give careful thought to when collective consultation on redundancies should begin.
• It is logical that redundancy consultation should take place before any plan is consolidated in the employer’s head. Talks in good faith require employers to start talks earlier rather than later with the maximum worker participation.
• It is practical to begin the consultation at the earlier stage rather than risk having a large protective award made which could amount to up to 90 days’ pay per worker affected.
• The CA should give further guidance and perhaps more clarity on when redundancy consultation is triggered and this will have practical implications for employers in terms of both the timing and the content of consultations. The ECJ may also give an opinion if a subsequent case involving private companies reaches that level.
• Based on the non-binding Advocate General’s opinion, the correct approach for employers in future, is probably to consult on collective redundancies when the decision of the employer is made that compels it to contemplate or plan for redundancies.
• Employers should ensure that any redundancy consultation is genuine and does not just pay lip service to the obligations.
• Employers may consider trying to use confidentiality agreements so that consultation can start with matters remaining highly confidential, although this is obviously impossible once employee representatives need to be elected.
• Employers who fail to comply with the collective redundancy consultation obligations could be liable for a protective award of up to 90 days' pay for each affected employee.
• The Government may try to change the consultation period and process for collective redundancies in any event.

​(unreported, UKEAT/0114/12 18 September 2012, EAT)
Issue: Redundancy consultation

The claimant had been employed for ten years, rising through the company to become Head of Human Resources and Payroll. By 2010 he was on a salary of £86,000 and had the title of Associate Director. The company was on the brink of liquidation and eventually a new chief executive was appointed who created an operating board made up of four executive roles. The  post of HR Director was offered to an external candidate with a Masters Degree in management development and 20 years of experience in senior HR positions. The claimant was not told of, or interviewed for the position, but was dismissed for redundancy. He claimed unfair dismissal, arguing that his role was not really redundant and that the dismissal was unfair due to lack of consultation. He was not informed of the HR Director appointment, a role he believed he should have been considered for. The employer argued it was entitled to conclude that the claimant was not a suitable candidate for the HR Director role.

The Employment Appeal Tribunal (EAT) held that the dismissal was fair, notwithstanding the absence of consultation because the consultation would have been futile. The EAT confirmed:

• Allowing the claimant to compete with the other candidate would have been a sham since the other candidate’s experience and qualifications were far superior to those of the claimant.
• In the circumstances it was reasonable for the employer to decide the claimant would not be suitable for such a senior role.

Implications for employers

• This case does not entitle employers to circumvent consultation in all redundancy cases.
• When implementing redundancy dismissals all stages of the redundancy procedure must be followed to the letter.
• However in a very small number of cases there is a possible defence where an employer may act reasonably, even if it did not warn and consult about a redundancy; this applies where consultation or warning would be utterly useless.
• Since Polkey v AE Dayton Services Ltd [1988] AC 344 where consultation would have been 'utterly futile' the employer may be able to prove that it was not reasonable to consult.
• However, lack of consultation will rarely be justified and as a matter of best practice, employers should not take that risk.

​(unreported, UKEAT/0039/11 1 March 2012, EAT)
Issue: Redundancy - suitable alternative employment

Samsung re-organised its print division and one of three previous heads of department were informed their roles would be abolished and merged into a new, single, position of Head of Sales.

The claimant unsuccessfully applied for both the new post and subsequently a more junior position. He was assessed on a presentation and marked against competencies used in the annual appraisal process including creativity; challenge; speed; strategic focus; simplicity; self control/empowerment; customer focus; crisis awareness; continuous innovation; teamwork and leadership. An external candidate was eventually appointed. The claimant claimed unfair dismissal based on an unfair selection involving inadequate consultation and the subjective criteria used for selection.

The Employment Appeal Tribunal dismissed the unfair dismissal claim, essentially stating that subjectivity in redundancy cases had become a dirty word and where a post has disappeared and the employer was selecting for a new role some subjectivity was inevitable.

Implications for employer

• Employers must always take great care when choosing the selection criteria for redundancies.
• Employers should choose redundancy selection criteria which are objective.
• However there is no absolute obligation on an employer to only use objective criteria in the context of an interview for alternative employment.
• However in some cases a significant degree of subjectivity in assessing who is best for a new role will be inevitable, as not all aspects of an employee's performance lend themselves to objective measurement.
• After a reorganisation where a redundant employee applies for a newly created role, the employer can appoint ‘the best person for the job’.
• A tribunal can consider how far an interview process was objective, but an employer's assessment of which candidate will best perform in a new role is likely to involve a substantial element of judgment which the tribunal should not override.
• A tribunal should not cross the line and look at what it thinks would have been reasonable for the employer to do. Instead the tribunal should consider what the employer did was unreasonable.

​(unreported, EAT/0445/11 20 February 2012, EAT)
Issue: Redundancy - selection pools

An actuary did not have enough work to fill a full-time role and her employer decided that a redundancy situation had arisen. A question arose as to whether the right sized pool had been used as the actuary had been placed in a selection pool of one. The employer contended that this was reasonable, rather than including all four actuaries in the pool, because her workload had reduced as the pension schemes she handled had either been wound up or the clients had been lost. There was a risk of losing other clients if they were transferred between the actuaries and also the team morale of the other actuaries would be affected if they were also put at risk of redundancy, given that their workloads had not reduced.

The employee brought a claim for unfair dismissal on the basis that all four actuaries should have been placed in the pool. The Employment Appeal Tribunal (EAT) agreed with the employment tribunal's decision that the dismissal was unfair. The EAT confirmed that employers can choose a pool that is the same size as the number of redundancies to be made. However in this case there were four actuaries, one of whom had lost clients through no fault of her own. The employer had acted unfairly in excluding the other three actuaries from the pool.

Implications for employers

• Employers must consider carefully whether to include any other employees in the pool for selection especially if the pool consists of one employee.

• Employers should keep a careful written record of their decision-making process about who is included in the pool and their reasons for this in order to show that they have genuinely applied their minds to the issue.

• Employers should also bear in mind it may be reasonable to consider including employees whose roles are not initially affected by the proposed redundancies in the selection pool and bumping those employees if necessary. (Bumping is the process of moving a potentially redundant employee into another role and dismissing the employee currently performing that role).

• There is no general obligation on employers to consider bumping, but in some circumstances it may be unreasonable of an employer to ignore the possibility altogether.

• Employers should always explain to the employee the basis for the choice of pool and an opportunity to challenge it.

• The test for whether the correct redundancy selection pool has been used, involves whether the decision was within the range of conduct which a reasonable employer could have adopted.

• A pool need not be restricted to employees doing the same or similar work.

• If the employer has genuinely applied its mind to the issue of who should be in the pool then it will be difficult, although not impossible, for an employee to challenge it.

​unreported, UKEAT/0171/1 6 February 2012, EAT)

The employer was a book distributor which wanted to expand its market to China. The claimant was employed in the UK, but was promoted to generate Chinese business and subsequently posted to China. Although he continued to do a small amount of his previous administrative and analysis work, this was for the most part redistributed to staff in the UK.

The employer decided that Chinese contacts were crucial to penetrate the Chinese market and engaged local agents in China. The claimant's role was therefore a genuine redundancy. After extensive consultation he rejected an offer of an alternative part-time administration role in the UK and was made redundant. He argued that other UK based employees with interchangeable skills should have been included in the pool and that no reasonable employer would have limited the pool to just him. He claimed unfair dismissal.

The Employment Appeal Tribunal agreed that there was a genuine redundancy situation with a meaningful consultation, reasonable steps had been taken to investigate the possibility of alternative employment and a fair procedure had been followed, including the use of a selection pool of one. The decision as to the pool is for the employer and in this case, the decision to limit the pool to one was logical as the claimant was the only employee in China.

Implications for employers

• Employers must consider carefully whether to include any other employees in the selection pool, especially if the pool consists of one employee.

• However a selection pool of one may be appropriate if the employee is in a unique role that is vanishing as in this case.

• Employers should also bear in mind it may be reasonable to consider including employees whose roles are not initially affected by the proposed redundancies in the selection pool and bumping those employees if necessary. (Bumping is the process of moving a potentially redundant employee into another role and dismissing the employee currently performing that role).

• There is no general obligation on employers to consider bumping, but in some circumstances it may be unreasonable of an employer to ignore the possibility altogether.

• Employers should keep a careful written record of their decision-making process about who is included in the selection pool and their reasons for this in order to show that they have genuinely applied their minds to the issue.

• Employers should always explain to the employee the basis for the choice of selection pool and give them an opportunity to challenge it.

• The test for whether the correct redundancy selection pool has been used, involves whether the decision was within the range of conduct which a reasonable employer could have adopted.

• A selection pool need not be restricted to employees doing the same or similar work.

• If the employer has genuinely applied its mind to the issue of who should be in the selection pool then it will be difficult, although not impossible, for an employee to challenge it.

​(unreported, EAT/0116/11 1 September 2011, EAT)
Issue: Redundancy - refusing suitable alternative employment

A senior community nurse who had worked for the Trust for over twenty years was at risk of redundancy because of a change in leadership structure. She was initially offered a lower position then offered a senior role as a modern matron at the hospital. She rejected this as she did not want to work in a hospital setting. Was she therefore redundant and entitled to a redundancy payment?

The Employment Appeal Tribunal held:

• The matron position was a suitable alternative to her previous role although it was not community based.
• However, her desire not to work in a hospital setting did provide her with a sound reason for refusing the job.
• She was redundant and entitled to receive a redundancy payment.

Implications for employers

• In a redundancy situation it is an important part of a fair and reasonable redundancy procedure to consider if there are any suitable vacancies for employees who would otherwise be made redundant.
• Failure to offer any available suitable alternative employment will make a redundancy dismissal unfair.
• Where an employee's contract is renewed (or a new contract agreed) and the renewal or re-engagement happens within four weeks of the end of the previous employment then there is no redundancy.
• If the employee unreasonably rejects an offer of suitable alternative employment they forfeit the right to a redundancy payment.
• The issues of job suitability and the reasonableness of the employee in refusing the offer are entirely separate considerations.
• The employer must consider objectively if the job offered is a suitable for the employee.
• This will involve skills, aptitude, experience, status, terms, wages, hours and location.
• Whether or not the employee is reasonable to refuse the job depends on the subjective reasons they have for rejecting it, for example where they live, their health and family commitments. The employee must have sound and justifiable reasons for refusing the offer.
• Employers should bear in mind that, even if the alternative role carries the same status and salary, the employee may still act reasonably in refusing the offer if they have justifiable reasons for doing so.
• If an employee has reasonably refused a suitable alternative job, they are then entitled to their statutory redundancy payment.

​(unreported, UKEAT/0028/10/SM 14 September 2010, EAT)
Issue: Redundancy - scoring matrices

A printing business lost a major contractor and consequently made redundant an estimator who had worked with the company for over 23 years.

It was agreed with the union that the scoring matrix headings were to be attendance, quality, productivity, abilities, skills, experience, disciplinary record and flexibility. The employee was told that overall that he had received the lowest scores. However the employer had failed to give him an explanation of why he received lower scores than two other employees in the selection pool.

The Employment Appeal Tribunal confirmed that he had been unfairly selected for redundancy.

Implications for employers

• Employers must conduct a genuine, adequate, effective consultation in a redundancy exercise.
• Fair consultation includes the provision of adequate information, especially in relation to subjective criteria scoring.
• Employers implementing redundancies should consider providing employees with an explanation for their scoring and a meaningful chance to comment on the scores and challenge them.
• Tribunals should not undertake a microscopic analysis of scoring by employers.

​(unreported UKEAT/0198/10 28 September 2010 EAT)
Issue: Redundancy - pool for selection

An HR Manager employed by a pharmaceutical company was absent for some three months undergoing and recovering from heart surgery. Shortly after her return she was informed that she was at risk of redundancy. No such notification was given to the HR executive who assisted her and had covered for her whilst she was off sick.

The manager made plain her view that both she and the other employee should have been at risk of redundancy, but the other employee was told she was not at risk. The manager made further proposals, but she was still be dismissed and brought a claim of unfair dismissal, representing herself before the tribunal.

The matter eventually reached the Employment Appeal Tribunal (EAT) which decided that she was unfairly selected. The EAT agreed with a tribunal that the employer was mistaken in automatically determining that the manager's role was redundant and the pool was therefore limited to one person. There should have been meaningful consultation as to the size of the pool.

Implications for employers

• Employers must carefully consider the size of a redundancy pool.
• Employers should consult on the appropriate extent of the pool as part of a fair redundancy selection.
• A pool should include all employees who carry out work of the kind which the employer no longer needs, and those whose jobs are similar to the employees for whom there is a reduced need.
• Employers should consider if a subordinate employee should be brought into a pool by looking at if there is a vacancy, how different the two jobs are, the difference in remuneration, the relative length of service of the employees, and the qualifications of the employee in danger of redundancy.
• Senior employees should not be selected just because the employer decides that one manager role has to go, a reasonable employer should at least consider whether to include a more junior employee in a pool with a more senior employee.
• Part of a redundancy consultation may involve asking employees if they would accept a more junior role at a reduced salary.

​(unreported, EAT/0024/10 30 April 2010, EAT)
Issue: Redundancy - cap on compensation scheme

Under an employer’s voluntary redundancy scheme employees received 3.5 actual weeks’ pay for each year of service. However, a cap on employees’ redundancy payments ensured that they did not exceed what the employees could have earned had they remained in employment until the normal retirement age (65). An employee who was two years away from retirement had his payment reduced by £13,600 due to the cap. He brought an age discrimination claim.

The Employment Appeal Tribunal held, overturning an employment tribunal decision that the purpose of the scheme was to compensate employees who took voluntary redundancy for the loss of earnings they would have expected to have received if they had stayed in employment. Therefore, it was legitimate to introduce a provision to prevent excess compensation and the cap was a proportionate means of achieving this aim. The scheme was therefore not discriminatory under the Age Regulations 2006.

Implications for employers

• A properly handled voluntary redundancy scheme should not contravene the Age Regulations 2006.
• Employers must consider the fairness of the scheme as a whole. In this case it was designed to protect employees' incomes after redundancy.
• If employers use an age-related cap on redundancy payments this may be indirectly discriminatory on the ground of age so the employer must be able to justify it. For example by proving the objective is to prevent employees from receiving a windfall.
• If an employer's redundancy scheme includes a cap that must be provable as a proportionate means of achieving a legitimate aim.
• A redundancy scheme which calculates redundancy pay by reference to length of service using the same age bands and multipliers as the statutory scheme would be acceptable.